IL&FS' operational creditors seek renewal of bank guarantees

New Delhi  :  Operational creditors of IL&FS on Thursday filed an application at the National Company Law Appellate Tribunal (NCLAT) seeking renewal or extension of some bank guarantees which have lapsed.

The appellate tribunal adjourned the case till April 29, 2019.

According to Section 5(20) of the Insolvency and Bankruptcy Code (IBC), an operational creditor is "any person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred". They may include credit for goods and services.

In its previous hearing on April 16, the bench headed by Chairperson, Justice S.J. Mukhopadhyay said that IL&FS should distribute funds to small creditors, in a manner that 80 per cent of their entitled amounts are paid.

On Wednesday, the Reserve Bank of India (RBI) directed the banks and financial institutions to disclose their outstanding to IL&FS and its group companies including provisioning required as per income recognition and asset classification (IRAC) and actual provisioning made against NPAs.

The circular gains significance as NCLAT's February order had said that "no financial institution will declare the accounts of 'Infrastructure Leasing & Financial Services Limited' or its entities as 'NPA' without prior permission of this Appellate Tribunal". 

The RBI, however, has since then contested the view and said that banks should classify the accounts of IL&FS and its companies as NPAs.